How To Become A Successful Angel Investor

Ryan Begelman

Well, I spent the better part of yesterday trying to teach my mom and my sister how to create Coinbase accounts, buy Bitcoin, and transfer Bitcoin into their accounts.

Sam Parr

Sean, do you think that angel investing is going to be the future of Sean Perry? I mean, do you think that this is going to be your full-time job?

Shaan Puri

Angel investing is a way for me to think of it as just dipping a net into a stream of flowing water with a bunch of fish inside. I'm not taking a boat out, spending an afternoon in the water fishing and trying to catch something. It's just in front of my house; there's this stream with fish going through. If I just put a net in, I can catch some great fish. That's what angel investing is for me, and that's what it's been basically for the last, I don't know, 6 or 7 years. My own friends, my personal network, or things that come inbound through getting more popular on Twitter and podcasts lead me to some opportunities. People want you in their deals, and you get to see deals early. Before, I used to sit on the sidelines and watch a bunch of those companies get big. Then I started, you know, asking a rich friend, "Hey, if I give you a good deal that you invest in, can I get a piece of the carry?" He said, "Yeah." That's how I got into Lambda School, which is already kind of like a big winner. As soon as I did that, I was like, "Man, if instead of getting a piece of this guy's carry, why can't I just do this myself?" So, as I got a little more money, I started doing it myself. Then with the rolling fund, that just lets me do it on steroids, where I can just do more.

Sam Parr

What percentage of your net worth... Well, let's be... You can not answer this, but let's just say that you invest $4,000,000 a year for 8 years. How much income do you think you're going to... Do you think you're going to make an additional 200 thou[sand]? Do you think you're going to make $200[,000]?

Shaan Puri

a year from this do you

Sam Parr

think you're gonna

Ryan Begelman

make a 1,000,000 bucks a

Shaan Puri

Year... so a good fund is going to, let's say, 3x its money over the kind of 7 to 10 year period. Great will be, you know, 5x or more. And if you caught an Uber, if you caught a Coinbase, you're laughing. Your returns are going to be super skewed just by this one company that's now worth tens of billions.

Sam Parr

but let's assume for this conversation let's assume you're only

Shaan Puri

so let's

Sam Parr

take the

Shaan Puri

First one, let's take the most conservative version of winning. Let's say I triple the money. Over the next three years, I'm going to deploy $12,000,000. If I triple that money, that's $36,000,000 that comes back into the fund after returning the initial investment. So, a total of whatever, $48,000,000. And so on the 36th, that's the profit. I get to keep 20% of the carry, right? So that's about $7,000,000, ish. Is my mental math right? You know, roughly $7,000,000. And that's $7,000,000 over, let's call it an 8 to 10 year time span. It's not the biggest. That's why I don't go all in on it, because I can make way more money building a business in that same amount of time. So if I...

Sam Parr

17. So, as a recap, did you say you have $7,000,000?

Shaan Puri

my military yeah

Sam Parr

That's a significant amount of money. That's $1,000,000 a year. So, you're thinking this will make you $1,000,000 a year for 7 years, starting in 7 years.

Shaan Puri

No, I think it's more like a lump sum that you get in 7 years. It's more like... I get nothing for 7 years, and then as these companies evolve - as many of them die and some of them do okay - then a few winners emerge and eventually [pay off].

Ryan Begelman

You reach a steady state where you keep going and you are making a million a year. Where it really gets interesting is where you scale and you start doing, you know, $20 million a year, $50 million a year, $100 million a year. And you know, eventually that's why you could see yourself hiring investment professionals. You could have a whole fund.

Sam Parr

have has any of yours paid out ryan

Ryan Begelman

Yeah, yeah, but I think there's another important point. It's not just about money; it's about well-being. As I'm always saying on the show, investing has been a vehicle for learning and for connecting to really interesting people. It's allowed me to go on these fun adventures where I'm learning about the latest things in crypto or the latest things in e-commerce. I'm connecting dots. The other thing it's done is made my primary businesses far more successful. I'm borrowing ideas. I'm learning, like, "Oh wow, look how this e-commerce company does performance marketing." I had never even heard of performance marketing until then. I brought it back to our newsletter company and thought, "Oh, at our newsletter company, we can buy Facebook ads and Google ads like this e-commerce company that I invested in called Warby Parker." Now, I'm cross-pollinating ideas, you know? Your show has done a really nice job of that.

Sam Parr

but does it you know does it distract you from your main job

Ryan Begelman

Well, that's where... that's why I think it was smart that this guy hired some people, and how, you know, Sean's hiring some people. Because then you can kind of be, as you said, in two places at once. But no, that's you.

Sam Parr

just have to you just have to take the risk of hiring a 150,000 $200,000

Ryan Begelman

No, you don't have to. I mean, I haven't done that, and I've still made a bunch of investments. But I missed a lot of investments because of that very reason. I was like, "Hey, I'm really laser-focused on BizNow, Summit, and Powder Mountain. I'm not going to look at a deal every day; I'm going to look at a deal every like three weeks." So, got it. I'm just going to miss a lot of stuff. You know, I missed... I mean, one of my COOs invested $150 in a crypto hedge fund, and he's, you know, up to like almost $6,000,000 in value. I don't know if I should be saying that here, but you know, I missed that because I was just like, "I'm busy. I can't look at that right now."

Shaan Puri

yeah that's totally true and by the way most of the time when people say like oh it's not about the money it's about the journey it's about the learning it's about the people you meet you know the kumbaya thing normally that's like you know that's the tell it's actually almost always about the money because if you took the money out they wouldn't do any of the shit this is actually one of the rare things where that's actually true because I actually was doing all these things I was meeting founders I was helping them with their businesses I was getting excited and digging into new spaces I was keeping a fantasy portfolio of like to learn like oh I'm tracking these spaces and I think these are gonna be big and I wanna learn about these spaces and here's some of the companies that are doing cool things and let me observe their growth tactics from the outside and try to see what's working and maybe apply that to my business I was literally doing all those things for fun before I ever put a dollar in you know I was subscribed to like I don't know 50 different angellist syndicates because you didn't have to put money in but you could get the investment memo because I literally loved the learning so much and I had no plan at the time to be investing in any of those I put $0 in sorry to all those syndicate leads you know I was that annoying guy that was subscribed and never invested but it was because I actually genuinely actually wanted to learn and I wanted to meet these founders and so this is one of the rarer cases where when you hear that normally it's bullshit in this case I'm a 100% on board with which chevron and like that's how I that's exactly how I think about it is this is like a my other friend described it as like it it's a great way to just blow off some entrepreneurial steam it's like you your brain if you're operating a business you all of a sudden start hearing about vertical farming and crypto and then like you know oh what the hell is you know what the hell are nfts and like you learn about all this shit and then part of you is like should I be doing that like what the fuck am I doing this stupid like real estate newsletter I should be going out there building you know this ride sharing company or whatever and so investing gives you a way to like get the high and dabble in that and have some financial upside but you don't it lets you stay focused as an entrepreneur so that's the other like like weird psychological things that come from investing is aside from the learning aside from the good friends you make and the network you build and the learn you know the cross ideas you get you literally just get to like it's like a release and and then you can go back to doing your thing

Sam Parr

Do you... but are you, Sean, are you the reason I did the syndicate thing? Well, I'm doing it with Joe and we're... I bet my own money. It's kind of like a rolling fund, but it's not. It's only on a deal-by-deal basis, whereas Sean, you have money that you could deploy a little more freely. I didn't do the rolling fund thing because I didn't want to have customers that I have to appease and talk to on a regular basis. I didn't want like a job. Do you feel now that you have like a job because you have 100 people who have given you money?

Shaan Puri

No, I write once a month updates, and I like doing it anyway. It's just, "Hey, here are the new companies we invest in." I would do that for my own documentation anyway, to capture what my conviction was at the time I made the investment. Here's what I believe, and here's why I believe in investing in it. I like having that for five years from now as an important thing for me. So in this case, I just publish it to my investors. Great! So that's all the maintenance that goes into it. There was a little bit, again early on, of actually getting the investors on board, but I took no meetings. I took no phone calls. I just said, "Here's the link." Because of this podcast, because of my newsletter, and because of my own track record and the deck I made, that was enough to raise the money for me. I know that that's kind of like a not everybody can do that part. Most people would have to go knock on a bunch of doors and really sell this thing. But the other thing you mentioned, like for you, if you just get busy and you just don't care about angel investing, you could just not do a deal for the next six months and no sweat. Whereas for me, I actually do need to deploy this money. There is a certain amount of startup pitches I need to take every month in order to be doing great investments. So, you know, I actually have to deploy this money. I can't just sit on my hands and decide I want to go on vacation or just go super heads down in my own business. I can't do that because I've taken on a fiduciary obligation to deploy these people's capital. What I thought would be, man, I used to invest, I don't know, like $50,000 a quarter, $100,000 a quarter max, and now I have to deploy $1,000,000 a quarter. I actually run out within the first two months of every quarter. So, it's actually not been an issue because my check sizes are bigger. Once people know you're investing, they send you deals. Your friends send you deals. They're like, "Hey, I'm doing this. This is a good deal." And they're like, "Oh wow, I didn't need to." The fundamentals make sense. There are other good co-investors there. I didn't need to go find this deal; it came to me. And that's the best thing that happens.

Sam Parr

what percentage of what percentage of your liquid net worth did you allocate to april

Shaan Puri

Before this, because now with the rolling fund, I'm investing OPM—other people's money. I only put a small amount of my own money into the fund. Before this, I was doing roughly $200,000 to $250,000 a year in investments. I don't remember what that was at that time in terms of liquid net worth, but it was kind of substantial. It wasn't, I don't know, half a percent or something like that. It mattered to me, but also, if I lost that money, I knew going in that at the very least, this money is locked up for a long time. I can't use it to go buy a vacation.

Sam Parr

Over or under 15? Over or under 15 or 10%? Like, was it more than 10? Because that's a lot.

Shaan Puri

I don't know... I'd have to think about it. I don't know how much money I made at the time because I made more money in the last couple of years than I did back then. What I do remember is thinking, when I very first started, that I needed about **$300,000** of a bankroll to even do this. I wanted to have enough of a portfolio to give myself a shot because, with angel investing, so many of your deals are going to be losers. So I thought, "Okay, I need to have 20 to 30 bets. I need at least **$300,000 to $500,000** of bankroll to go do this." At the very beginning, I didn't have that. That would have been an irresponsible amount of money for me; that was like, at the time, I don't know, half of the money I had or something like that. So I said, "Okay, I can't do that." That's why I started talking to other people and being like, "Hey, if I scout for you, can I get carry and you put up the capital?" And that's how I got started.

Ryan Begelman

although you

Sam Parr

know aperi go ahead

Ryan Begelman

Even when you have almost no money, I really like this approach as opposed to buying public equities when you have very little money. This is because of the learning, the connections, and the benefits that it could have on your own business. I was betting a very high percentage of my money initially, and it really helped me. Rather than just buying stocks in companies like Coca-Cola or Walmart, which are publicly traded and where I learn nothing and meet no one, this approach actually benefits the day-to-day operations of my newsletter business, my community business, or my real estate business. These experiences were essentially enhancing my ability to make money in my day job. So, that's why I actually think when you're small, it's not a terrible idea. In fact, it can be a high business advantage.

Shaan Puri

I read a Tim Ferriss article a while back. He wrote it a long time ago, before he started investing. He was basically like, "I'm just gonna fund my own MBA." If I was going to spend $200,000 going to business school, I think I can learn more by investing that $200,000 in a mix of public stocks and private startups. When I read that, I was like, "Oh, absolutely!" I will build a network, I will gain business knowledge, and I'll have skin in the game. Actually, this might become a profitable venture. You know, the worst-case scenario is that this is my alternative to going to Wichita State and getting my MBA. Why would I not do this? So once I read that, that's how I started thinking about it. I decided, "I'm going to put $120,000 in. That's like, you know, business school." Let me just get going.

Ryan Begelman

So we not only thought about that with investing, but we lost $25,000 in the first summit we held. Various private summits in between summits where we would lose $20,000 here, $10,000 there to throw like an event. I always saw that as an investment, like you're saying, in my network or my learning. The same thing... I was talking to a guy the other day about, you know, he wanted some coaching and he was debating whether I was worth like the monthly amount. He had like $400 in his savings and I was like, "Well, what do..."

Sam Parr

you wanna do what else do you wanna do

Ryan Begelman

With the $400, he wanted to put it into Robinhood and buy stock. I was thinking, like, man, if I had known about coaching or consulting or some of the things I now know about, you know, like trainings that you could get online—like taking a writing course or learning from Perel online—those things are so valuable. They're so worth the like $3,000 here, the $5,000 there. If you have a little bit of money saved, I think that's so much better than trying to make, you know, the index return on the stock market, especially when you don't have that much money. I think somebody said to me, "Concentrate to get rich, diversify to stay rich." When you don't have that much money, put your money into building yourself up, building up your learning, and building up your network. Then later, when you're much richer, diversify and have, you know, an allocation in a portfolio like that.